Prices and consumer prices received increased attention through 2022 and 2023 after inflation rates soared around the world following the COVID-19 pandemic and the Russian invasion of Ukraine. The pandemic disrupted supply chains around the world and it took months for these to re-establish when demand started to increase again. Furthermore, the no-covid policy oft he world's largest exporter China meant that production was shut down for weeks, further spurring the inflation. When Russia's President Vladimir Putin decided to invade Ukraine in February 2022, this caused food and especially electricity and gas prices to increase sharply.
In recent years , since the rise of the internet, the perception of prices has changed significantly. While price information used to be limited geographically, consumers are now subject to almost complete price transparency. It is not uncommon for consumers to go to a store, pick something out and then compare prices on their Smartphone before making a purchase.
How are price changes measured?
On a national level, price changes are observed with the help of price indices. These indices are usually compiled based on a fixed basket of goods and services and allow to track price changes over time. The most important price indices are the Consumer Price Index (CPI), the Producer Price Index (PPI) and the Wholesale Price Index. They are regularly published on a national level and are followed closely by the broad public.
Consumer Price Index (CPI) and Producer Price Index (PPI)
The CPI is of particular interest because it is the prime measure of inflation and as such influences financial decisions on all levels. Although the PPI receives less attention, it is not necessarily less relevant to consumers. Afterall, changes in producer prices often ultimately cause a change in consumer prices as well. A prime example of this mechanism is the oil price. Subject to high volatility, the price of oil influences costs across all stages of the production process and consequently alters the price of consumer goods as well.
The price of gold
Perhaps the most closely observed price, next to oil, is the price of gold. Gold is not subject to inflation and other external influences and is hence a popular store of value in times of economic uncertainty. During the global financial crisis in 2008, many investors shifted their wealth to gold and, as a result, the gold price has soared to unknown heights.
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Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics